Efficient venture capital financing combining debt and equity

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Efficient venture capital financing combining debt and equity

Author Info

Leslie M. Marx () (W.E. Simon Graduate School of Business Administration, University of Rochester, Rochester, NY 14627, USA)

Abstract

I present a model of venture capital contracting in which contracts that involve a mixture of both debt and equity are efficient and dominate pure-equity and pure-debt financing. The optimal contract balances the venture capitalist's incentive to intervene in the project and the entrepreneur's desire for control.

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Publisher Info
Article provided by Springer in its journal Review of Economic Design.

Volume (Year): 3 (1998)
Issue (Month): 4 ()
Pages: 371-387
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Handle: RePEc:spr:reecde:v:3:y:1998:i:4:p:371-387

Note: Received: 9 September 1997 / Accepted: 3 April 1998
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Find related papers by JEL classification:
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure

Cited by:
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Schmidt, Klaus M., 1999. "Convertible Securities and Venture Capital Finance," CEPR Discussion Papers 2317, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Schmidt, Klaus M., 1999. "Convertible Securities and Venture Capital Finance," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
- Klaus M. Schmidt, 2003. "Convertible Securities and Venture Capital Finance," Journal of Finance, American Finance Association, vol. 58(3), pages 1139-1166, 06. [Downloadable!] (restricted)
Carvalho, Antonio Gledson de & Calomiris, Charles W. & Matos, Joao Amaro de, 2005. "Venture capital as human resource management," FEUNL Working Paper Series wp470, Universidade Nova de Lisboa, Faculdade de Economia. [Downloadable!]
Other versions:
- Antonio Geldson de Carvalho & Charles W. Calomiris & Joao Amaro de Matos, 2005. "Venture Capital as Human Resource Management," NBER Working Papers 11350, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- de Carvalho, Antonio Gledson & Calomiris, Charles W. & de Matos, João Amaro, 2008. "Venture capital as human resource management," Journal of Economics and Business, Elsevier, vol. 60(3), pages 223-255. [Downloadable!] (restricted)
Andrea Schertler, 2000. "Venture Capital Contracts: A survey of the recent literature," Kiel Working Papers 1017, Kiel Institute for the World Economy. [Downloadable!]
Hellmann, Thomas F., 2002. "IPOs, Acquisitions and the Use of Convertible Securities in Venture Capital," Research Papers 1702r, Stanford University, Graduate School of Business. [Downloadable!]
Other versions:
- Hellmann, Thomas, 2006. "IPOs, acquisitions, and the use of convertible securities in venture capital," Journal of Financial Economics, Elsevier, vol. 81(3), pages 649-679, September. [Downloadable!] (restricted)
Hellmann, Thomas F., 2000. "Going Public and the Option Value of Convertible Securities in Venture Capital," Research Papers 1703, Stanford University, Graduate School of Business. [Downloadable!]
Andrea Schertler, 2000. "The Impact of Public Subsidies on Venture Capital Investments in Start-Up Enterprises," Kiel Working Papers 1018, Kiel Institute for the World Economy. [Downloadable!]

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